109 United Coconut Planters Bank, petitioner vs.

Spouses Samuel and Odette Beluso,

respondents.
G.R. No. 159912 / 17 August 2007

Topic: Real Mortgage

Facts: UCPB granted spouses Samuel and Odette Beluso a promissory notes line under a credit
agreement whereby the latter could avail from the former credit of up to a maximum amount of
P1.2 Million for a term ending on 30 April 1997. Other than their promissory notes, the spouses
Beluso also constituted a real estate mortgage over certain parcels of land as additional security
for the obligation. The credit agreement was subsequently amended to increase the amount of
the promissory notes line to a maximum of P2.35 Million and to extend the term to 28 February
1998.

The spouses Beluso availed of the credit line by executing several promissory notes. UCPB applied
interest rates on the different promissory notes ranging from 18% to 34%. UCPB demanded
payment to which the spouses failed to comply. Thereafter, UCPB foreclosed the mortgaged
properties to secure their credit line. The spouses Beluso filed a petition for annulment,
accounting and damages against UCPB. The lower court declared the interest rate imposed by
UCPB as well as its foreclosure of the spouses’ properties void. This was affirmed by the Court of
Appeals.

ISSUE: Whether or not the foreclosure is valid.

RATIO/HOLDING:
Yes. A valid demand, albeit excessive, was made by UCPB upon the spouses, and as such the
spouses may be considered in default with respect to the proper amount of the obligation to
UCPB, and thus, their mortgaged properties may be foreclosed. The proceeds of the foreclosure
sale should then be applied to the extent of the amounts to which UCPB is rightfully entitled. The
Court also held that none of the grounds for the annulment of a foreclosure sale are present in
this case. Such grounds are: (1) that there was fraud, collusion, accident, mutual mistake, breach
of trust or misconduct by the purchaser; (2) that the sale had not been fairly and regularly
conducted; or (3) that the price was inadequate and such inadequacy was so great as to shock
the conscience of the court.

DISPOSITIVE: The decision of the Court of Appeals is AFFIRMED with MODIFICATIONS.